Professional Documents
Culture Documents
Explanation Stitch in Time must pay the whole amount owing in 15 days (net owing
15 days).
c
Purchases Journal
TOTALS $
Explanatio GST is a tax imposed on the sale of goods and services. The $380 paid
n is for the 10 spools of thread – this is the value of the Inventory of
materials. The $38 is separate as it is the GST charged by the Australian
Government, which is being collected by the supplier on the ATO’s
behalf. It is not part of the cost of the Inventory of materials and will in fact
reduce Stitch in Time’s GST liability to the ATO.
b
Purchases Journal
Explanation The source documents in the Purchases Journal won’t run in sequence
because they are not issued by Sparky Electricians but by their
suppliers who issue their invoices to all their customers. Therefore,
Sparky Electricians is receiving purchase invoices from a variety of
suppliers who have other customers as well.
Explanation The GST incurred on credit purchases will be forwarded to the ATO.
Therefore, this GST incurred by Sparky Electricians will reduce their
GST liability to the ATO.
Calculation
Accounts Payable balance 2 870
at start
+ Credit purchases incl. GST 1 925
4 795
– Payments to Accounts 1 890
Payable
Accounts Payable balance $2 905
at end
Accounts Payables balance $ 2 905
Calculation
Accounts Payable balance at start 34 400
+ Credit purchases incl. GST 19 750
54 150
– Payments to Accounts Payable 32 000
Accounts Payable balance at end $22 150
Accounts Payable balance $ 22 150
b
Explanation It is important that credit terms are stated on the invoice so that the
customer knows when they must pay the amount owing. A business will
only grant credit for a specific period of time as they require the cash
from the credit fee to pay their obligations.
Explanation This transaction is considered revenue because it has arisen from the
ordinary activities of the business and the transaction has increased
assets (Accounts Receivable) and will lead to an increase in owner’s
equity and it is not Capital contribution.
d
Sales Journal
Date Accounts Receivable Inv. No. Fees GST Total
Accounts
Receivable
Oct. 5 Ouch Dental 149 4 500 450 4 950
TOTALS $
e
Element Increase/Decrease/No Effect Amount $
Asset Increase – Accounts Receivable increase $4 950 4 950
Liability Increase – GST liability increase $450 450
Owner’s equity Increase – Revenue increase $4 500 4 500
b
Sales Journal
Reason 1 This does not take into account any existing balances of Accounts
Receivable that may have existed at the start of the period.
Reason 2 This does not take into account any receipts from Accounts Receivable
that may have occurred at the start of the period.
Explanation Any GST charged on Credit fees is GST charged and collected later by
the business on the Australian Government’s behalf. Therefore, this is
owed to the ATO and will increase GST payable.
c
Sales Journal
Calculation
Accounts Receivable 8 000
balance at start
+ Credit fees incl. GST 8 459
16 459
– Receipts from Accounts 9 240
Receivable
Accounts Receivable $ 7 219
balance at end
Accounts Receivable balance $ 7 219
Explanation Not all Accounts Receivable have met their credit terms as Fab Events
still has $250 outstanding from the last period that exceeds the 30-day
credit terms set by Unbreakable Gear. Party Dayz and Lando’s Café
paid within the specified credit terms. Party Dayz and Wow ART are still
within their credit terms.
Sales Journal
Date Accounts Receivable Inv. No. Fees GST Total
Accounts
Receivable
Jul. 2 Sunshine Secondary College 109 3 400 340 3 740
5 Blackburn Secondary College 110 1 530 153 1 683
12 Beaconsfield Primary 111 400 40 440
23 Sunshine Secondary College 112 1 000 100 1 100
30 Beaconsfield Primary 113 510 51 561
TOTALS $ 6 840 684 7 524
Calculation
Accounts Payable balance 3 150
at start
+ Credit purchases incl. GST 8 723
11 873
– Payments to Account 3 700
Payable
Accounts Payable balance $8 173
at end
Accounts Payable balance $ 8 173
Calculation
Accounts Receivable 5 280
balance at start
+ Credit fees incl. GST 7 524
12 804
– Receipts from Accounts 7 713
Receivable
Accounts Receivable $5 091
balance at end
Accounts Receivable balance $ 5 091
Explanation Musical Beat can verify these balances by cross checking the original
source documents with the relevant journals to ensure all information is
correct and free from bias. Another double check would be to add up all
the relevant Account Receivables / Payables and see if the same
answer was reached.
c
Explanation No Drips Painting would be reported as an Account Receivable under
current assets in the Balance Sheet of Paint World. This is because
Paint World has sold goods on credit to the No Drips Painting and now
has a present economic resource which has the potential to produce
future economic benefits within 12 months at the end of a reporting
period.